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Chile Exchange Rate January 2016

Chile: Chilean peso depreciates to multi-year low at the beginning of 2016

January 13, 2016

The Chilean peso weakened to a fresh low in January, continuing the overall depreciation trend that has been in place since May 2013. The peso was somewhat volatile in recent weeks and on 11 January the currency traded at 731.9 CLP per USD, which was the weakest value in many years. The reading represented a 3.2% depreciation over the same day in December 2015 and a 19.1% depreciation in annual terms. Since the beginning of this year, the peso lost 3.2% of its value.

Ongoing weakness in the peso is mainly the result of lower growth prospects for the Chilean economy and struggles in the country’s important mining sector. Slowing demand from China—the largest buyer of Chile’s top export, copper—amid a restructuring of China’s economy is the main reason behind a prolonged fall in copper prices. In fact, copper prices dropped to an over-six-year low in December. In addition, the depreciation of the peso also reflects that the U.S. dollar is gaining strength on the back of an improving U.S. economy and growing risk aversion regarding emerging market currencies.

Panelists surveyed for this month’s LatinFocus report expect the peso to trade at 709 CLP per USD at the end of 2016. Next year, the panel sees the currency trading at 715 CLP per USD.

The Adimark GfK consumer confidence index (IPEC, Índice de Percepción de la Economía) dipped slightly from December’s multi-year high of 53.1 to 51.5 in January, ending a run of ten consecutive monthly increases.

Economic activity rose 2.6% in December on an annual basis according to the Monthly Indicator for Economic Activity (IMACEC) published by Chile’s Central Bank, down from 3.2% in November but overshooting analysts’ expectations for the second straight month.

The business confidence index (IMCE, Indicador Mensual de Confianza Empresarial) published by ICARE and the Universidad Adolfo Ibáñez surged from 44.0 points in December to 53.8 points in January, moving into optimistic territory for the first time since March 2014.